Heterogeneous environmental policies and employment: evidence from China

This paper attempts to investigate how the rapid development of China's environmental policy contributes to the changes in China's labour market. We first categorise the environmental regulations into (i) command-and-control policies, (ii) economic incentive policies, and (iii) voluntary environmental agreements (VEAs). Then, we use the provincial panel data over the 2000-2015 period to estimate the effect of alternative environmental regulations on employment in China. The results show that alternative environmental regulations have different impacts on employment. This difference even exists within the same group of environmental policies. Amongst the command-and-control policies, the three simultaneities policy leads to less employment, while the deadline governance systems increase employment. For economic incentive policies, higher environmental tax leads to lower employment, while more funding for environmental research promotes employment. The results also show that more VEAs reduced labour demand. In addition, the dynamic impact and regional heterogeneity of environmental regulations on employment are confirmed by the empirical estimation. Specifically, the economic incentive policies significantly impact employment in Central and Western China, whereas they have a non-significant impact on employment in Eastern China. This finding confirms that economic development impacts the relationship between environmental regulations and employment.